Nov 092013
 
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 Social Security wage base rises to $117,000 for 2014

The amount of earnings subject to taxation for purposes of calculating social security tax is called the social security wage base.  This wage base changes each calendar year based on the national average wage index.   The payroll tax deduction is actually based on two components:  (1) Old-Age, Survivors, and Disability Insurance, or OASDI, and (2) Medicare Hospital Insurance, or simply Medicare.

Social secruity

Social security (Photo credit: SalFalko)

The OASDI rate is 6.2% and is set by statute.  This tax is paid by both the employee and the employer.  The maximum deduction from an employee’s wages for calendar year 2014 is $7,254.00.  This amount is calculated by multiplying the maximum wage base ($117,000 for 2014) by the OASDI rate of 6.2%, i.e., $117,000 x 6.2% = $7,254.00.

The Medicare rate is 1.45%.  Since 1994, this tax has had NO maximum amount of wages, or wage base.  It is calculated in the same manner as OASDI, but without regard to any limit on the amount of wages.  Therefore, an employee with taxable wages of $125,000, for example, would have a deduction of $1,812.50 ($125,000 x 1.45%).

The combined total payroll tax deduction for Social Security and Medicare would be $9,066.50 ($7,254.00 + $1,812.50)  This amount is paid by both the employee and the employer.  Therefore, the amount of Social Security and Medicare tax paid based on this scenario would be $18,133.00.

New for 2014 – The additional Medicare tax of 0.9% applies to wages exceeding $200,000 for single taxpayers and $250,000 for married taxpayers filing jointly.  This tax is paid only by the employee.  There is no employer portion for this tax, although employers must withhold the employee portion.

Social Security wage base rises to $117,000 for 2014.

For more information and tax tips or assistance with calculating payroll tax deductions, contact me using the form below.

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Disclosure of Material Connection: Some of the links on this blog are “affiliate links.” This means if you click on the link and purchase the item, I might receive an affiliate commission. Regardless, I only recommend products or services I use personally and believe will add value to my readers. I am disclosing this in accordance with the Federal Trade Commission’s 16 CFR, Part 255: “Guides Concerning the Use of Endorsements and Testimonials in Advertising.”

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Sep 222011
 
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Creating a household budget can be a scary thought for most people. A lot of people look at a household budget as something that will restrict them from doing things. In reality, a budget is actually a tool that you will use to help guide you financially so you are able to buy and do the things that are important to you in your life. One of the best personal finance tips you can employ today would be to create a household budget. Take a look at the following benefits to creating a household budget.

1. Take control of your money- First and foremost, having a household budget lets you finally take control of your money once and for all. When you see how much money you have going in and how much money you have going out, you will be able to make better financial decisions. Instead of stressing over how you will bring more money in, what if you could cut back on your expenses? Having a budget let’s you see what you are spending your money on so you are able to make better choices.

2. Create a financial plan- No one wants to work forever. A budget will let you start to create a financial plan so you can make sure to reach your future financial goals. We work an average of 35-40 years of our life, so why not make our money work for us, instead of spending it all on things we end up tossing away later?

3. Stress less – When you know where your money is going each month, you will stress less over money (or the lack of it). Once you get a firm understanding of your financial situation and start to make some changes, you will stress less over money each month. Your situation still may not be perfect, but you can get yourself on the road to personal finance recovery quickly by following a monthly budget.

4. Live within your means- One of my favorite quotes is “A budget tells us what we can afford, but doesn’t stop us from buying it”. And that’s just the thing about budgets, if we don’t follow them, they don’t work! Once you see what you can afford each month, you will begin to live within your means to make your budget work.  This isn’t always a negative thing either. Sometimes cutting things out can make life much simpler and less hectic which in turn can make you happier!

5. Find out what’s important- When you see what you have coming in and going out each month, you may start to notice that some things just aren’t important anymore. Is it worth having to stress about where the money will come from when you decide what your stressing over isn’t worth it? It’s doubtful. Once you start to understand your spending you will realize that some things just aren’t that important.
Understand that creating a household budget may take time. But once you get started, you will start to see the ways your financial situation improves. There are many reasons to create a household budget. If you haven’t done so, what are you waiting for? Get started today!

Disclosure of Material Connection: Some of the links on this blog are “affiliate links.” This means if you click on the link and purchase the item, I might receive an affiliate commission. Regardless, I only recommend products or services I use personally and believe will add value to my readers. I am disclosing this in accordance with the Federal Trade Commission’s 16 CFR, Part 255: “Guides Concerning the Use of Endorsements and Testimonials in Advertising.”

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